Chapter 5 Focus on Cash Flow Until Aha Flashcards
(22 cards)
What is the significance of Aha in the entrepreneurial process?
Aha is when potential is evident and no longer needs to be promised.
What typically happens to VC interest before and after Aha?
Before Aha, VC interest is scarce; after Aha, it is usually easier to get VC.
What should entrepreneurs focus on until they reach Aha?
Entrepreneurs should focus on positive cash flow and be frugal.
What is the PRE-AHA STAGE in the entrepreneurial journey?
The stage where entrepreneurs write business plans and seek equity financing, with 99.8% not receiving VC.
What is the OPPORTUNITY-AHA STAGE?
The stage when product advantages may be evident but the right business strategy has not been proven.
What risks do entrepreneurs face at the OPPORTUNITY-AHA STAGE?
Minimal negotiating clout, dilution of ownership, and potential loss of control.
What is the BUSINESS-AHA STAGE?
The stage when the business is taking off due to the right strategy, leading to increased investor interest.
What challenges do entrepreneurs face at the BUSINESS-AHA STAGE?
Deciding whether to retain leadership or hire a professional CEO.
What is the LEADERSHIP-AHA STAGE?
The stage where venture potential and leadership skills are evident, attracting VC interest.
What unique control did Mark Zuckerberg have over Facebook’s VC?
He demanded super-voting rights, allowing him to control 57% of the company despite owning only 28%.
Why are VCs considered picky in their investments?
They seek ventures that demonstrate evidence of potential to dominate high-potential industries.
What was a key reason Steve Jobs struggled to secure VC funding?
He could not eliminate risk to the satisfaction of potential investors.
What is a common source of initial capital for startups that do not receive VC?
Family and friends.
What effect does the source of competitive advantage have on VC interest?
If the advantage is in technology or strategy, VCs are more likely to invest.
What percentage of ventures in the Minnesota study succeeded solely due to the entrepreneur’s skills?
68%.
True or False: Securing VC guarantees success for a venture.
False.
What trend is observed in VC funding as ventures progress to later stages?
VCs invest more money in fewer ventures.
What is the implication of focusing on cash flow until Aha?
It allows entrepreneurs to retain more control and equity in their ventures.
What is the risk associated with VC in earlier stages of a venture?
Higher risk leads to VCs demanding more control and higher target returns.
Fill in the blank: 80% of ventures that receive VC end up _______.
[failing]
What is advised for entrepreneurs who can build their ventures to Aha without VC?
To evaluate their options for continued growth.
What should entrepreneurs focus on to manage dilution when seeking VC?
Reaching leadership Aha before seeking VC.
